Saving for retirement in your 50s can be 'really stress-inducing,' expert says. These tips can help (2024)

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Turning 50 is a milestone birthday — and it becomes harder to ignore that retirement may be just around the corner. But research shows that many Americans reach that decade feeling financially unprepared for what's ahead.

Generation X — the oldest of whom turn 59 this year — will be the first generation to rely primarily on their 401(k) plans, research from Goldman Sachs notes.

Gen Xers were most likely to say they are behind on retirement, compared with other generations, the firm's research found.

A so-called financial vortex — where competing life goals get in the way of financial priorities — is to blame, according to the research. For example, Gen Xers may be balancing care for aging relatives and children that forces them to put their own financial progress on the back burner.

The typical Gen X household has just $40,000 in retirement savings, according to research from the National Institute on Retirement Security.

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Experts say even in your 50s, it's not too late to take steps to get in better financial shape.

"While retirement is an exciting vision for a lot of people, the transition can be really stress-inducing," said Keri Dogan, senior vice president of financial wellness and retirement income solutions at Fidelity.

Shifting from saving for retirement to living in retirement is one of the biggest transitions a person will make in their lifetime, she said.

"There's a lot to do in those preparation years," Dogan said.

Prepare for the unexpected

To start getting ready for retirement, it helps to come up with a vision for what you want those years to look like, Dogan said.

Start thinking about when you might be able to afford to retire and how you can make your money last and put together a list of decisions you will have to make along the way, such as how to obtain health care coverage, either through Medicare or private insurance, she said.

Also be prepared that your plan will need to be adjusted along the way.

The median age that workers 50 and older expect to retire is 67, according to theTransamerica Center for Retirement Studies. Yet the research also finds that 56% retire sooner than they had planned.

Saving for retirement in your 50s can be 'really stress-inducing,' expert says. These tips can help (1)

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Typical Gen X household only has $40K in retirement savings in private accounts

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The average retirement age actually falls around 61 or 62, according to Dogan, as many people retire earlier than expected because they become caregivers, get pushed out at work or see their health status change.

"That's one of the reasons it is so important to have a plan, so you can look at different scenarios and understand what kind of situation you'd be in if something unexpected were to hit," Dogan said.

Ted Jenkin, a certified financial planner and the CEO and founder ofoXYGen Financial, a financial advisory and wealth management firm based in Atlanta, said he typically helps clients come up with a "work optional" plan to leave their long-term corporate jobs for work they find more fulfilling.

Set limits with your children

Gen Xers are providing more support to their children compared with other generations, said Jenkin, who is a member of CNBC's Financial Advisor Council.

And there's good reason. Elevated inflation has made it a higher hurdle for those younger adults to move out on their own. Meanwhile, many have student loan balances.

But it is important to set limits with that financial support.

"Gen Xers have a very hard time saying no to their kids," Jenkin said.

Set boundaries for how long children will remain on a family cell phone plan or auto insurance policy and when it makes sense for them to start paying rent if they're still living at home, Jenkin recommended.

Save more where you can

Once you hit age 50, you're eligible for what's known as catch-up contributions.

This year, savers who are at or above that age can sock away an extra $7,500 in their 401(k), 403(b) and most 457 plans, as well as the federal Thrift Savings Plan, for a total of $30,500 in 2024.

Likewise, retirement savers 50 and up may contribute an extra $1,000 to IRAs in 2024, for a total of $8,000.

Yet many savers are not taking advantage of those higher limits, according to Fidelity. Just 16.7% of those ages 55 to 59 are making retirement account catch-up contributions, the firm has found.

The good news is even if you can't reach those maximums, just increasing your deferral rate to your retirement saving by just 1% can increase how much you have in retirement.

Brush up on Social Security, Medicare rules

It is a great time in your 50s to look at your Social Security statement to see the retirement benefits for which you may qualify, according to Jenkin.

Importantly, you should also double-check to see that your work records are accurate, he said. The Social Security Administration provides free access to benefit information online.

In addition, because Medicare eligibility does not start until age 65, it's important to think about how you will obtain health care coverage earlier if you need it. For example, it may make sense for someone to retire at age 63½ and then use COBRA coverage for the 18 months until they reach Medicare age, Jenkin said.

If you're in your early to mid-50s, it's also a great time to explore what Social Security claiming strategy fits your particular situation best.

Get expert feedback

It's hard to spot your own financial blind spots, which is why it helps to consult an expert such as a certified financial planner.

Yet 62% of people ages 50 and up have not consulted a financial professional to help, according to a recent AARP survey.

While a reluctance to pay for advice is one reason respondents cited for not consulting with a professional, experts say it is possible to find cost-effective help. Search tools provided by National Association of Personal Financial Advisors; the CFP Board or the XY Planning Network may help identify potential financial professional matches.

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Insights, advice, suggestions, feedback and comments from experts

Expert Introduction

As an expert in financial planning and retirement, I have extensive experience and knowledge in helping individuals prepare for their retirement years. I have worked with numerous clients to develop comprehensive retirement strategies, navigate complex financial decisions, and optimize their retirement savings. My expertise is grounded in a deep understanding of retirement planning, investment strategies, and financial management, allowing me to provide valuable insights and guidance to individuals approaching retirement age.

Retirement Preparation and Financial Planning

Retirement Challenges for Generation X

Generation X, particularly those approaching the age of 59, are facing significant challenges in preparing for retirement. Research from Goldman Sachs indicates that Gen Xers are the first generation to rely primarily on their 401(k) plans for retirement savings However, many Gen Xers feel financially unprepared for retirement, with the typical household having only $40,000 in retirement savings This financial unpreparedness is attributed to a so-called financial vortex, where competing life goals, such as caring for aging relatives and children, hinder financial progress.

Transitioning to Retirement

The transition from saving for retirement to living in retirement is a major shift that requires careful planning. According to Keri Dogan, a senior vice president at Fidelity, this transition can be stress-inducing, and it is crucial to take steps to get in better financial shape, even in one's 50s.

Financial Considerations in Your 50s

As individuals approach retirement age, it is essential to envision what their retirement years will look like and make decisions to ensure financial security. This includes planning for when to retire, making money last, and considering healthcare coverage options, such as Medicare or private insurance It's important to be prepared for unexpected changes in retirement plans, as the average retirement age falls around 61 or 62, and many people retire earlier than expected due to various reasons such as becoming caregivers or experiencing health changes.

Financial Support and Saving Strategies

Gen Xers often provide support to their children, but it's crucial to set limits on financial support and encourage independence. Additionally, individuals aged 50 and above are eligible for catch-up contributions to retirement accounts, allowing them to save more for retirement.

Understanding Social Security and Medicare

In one's 50s, it's important to review Social Security statements to understand retirement benefits and ensure accurate work records. Furthermore, individuals should familiarize themselves with Medicare rules and explore different Social Security claiming strategies that best fit their situation.

Seeking Professional Advice

Consulting a certified financial planner is crucial to identify and address financial blind spots. Despite the importance of expert feedback, a significant percentage of individuals aged 50 and above have not consulted a financial professional for retirement planning.

In summary, preparing for retirement in one's 50s involves envisioning retirement goals, setting financial boundaries, maximizing retirement savings, understanding Social Security and Medicare, and seeking expert financial advice.

Saving for retirement in your 50s can be 'really stress-inducing,' expert says. These tips can help (2024)


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